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Scott Sits on the Wrong Side of Medicaid Expansion

If a deal sounds too good to be true, it usually is. Perhaps
Gov. Rick Scott should have kept that in mind before deciding to
accept federal funds to expand the state’s Medicaid program in
conjunction with the Patient Protection and Affordable Care Act,
aka Obamacare.

Obamacare originally required every state to expand eligibility
for Medicaid to 138 percent of the poverty line, or roughly $32,500
per year for a family of four. Not surprisingly, many states
balked, and last summer the Supreme Court ruled 7-2 that the
federal government could not force states to expand their programs.
In fact, Florida was a party to that lawsuit.

So to incentivize states to go along, the federal government is
dangling “free” money in front of them. For the first three years,
the federal government promises to pay 100 percent of the cost of
expansion. This will gradually decline to 95 percent in 2017, 94
percent in 2018, 93 percent in 2019 and 90 percent in 2020. Given
that the federal government provides only 58 percent of the funding
for Florida’s current Medicaid program, this sounded like too good
a deal for Gov. Scott to resist.

He was wrong.

First, there is no such thing as free money. Even with the
federal government picking up 90 percent of the cost, Florida
taxpayers are not off the hook. Ten percent of a very big number is
still a very big number. In fact, it is estimated that once full
federal funding expires and Florida is required to pick up part of
the cost, the Medicaid expansion will cost the state’s taxpayers
$5.36 billion.

However, those estimates significantly underestimate the cost to
Florida because they ignore a second category of recipients likely
to be added to the Medicaid rolls: what the Robert Wood Johnson
Foundation has dubbed “the woodwork effect.”

The governor’s turnaround
will essentially create a Florida where more than one in five
residents will be on Medicaid.

As the Medicaid expansion moves forward, thousands of Floridians
will discover they are eligible and be more likely to sign up. In
fact, it has been estimated that 357,000 people, roughly 22 percent
of 1.63 million new Medicaid recipients enrolled under the
expansion, would be “coming out of the woodwork.” This group is not
eligible for the 90/10 match, but is covered under the old formula,
with Florida responsible for slightly more than 40 percent of the
cost.

While there have been no reliable estimates for Florida of the
additional cost from “woodwork” recipients, studies in other states
show the cost to state taxpayers doubling. This comes at a time
when Medicaid already consumes 30 percent of Florida’s budget, more
than education or transportation.

Of course, any estimate of state costs assumes that the federal
government will keep its end of the bargain. But with Washington
facing an ongoing debt crisis, Medicaid funding will almost
certainly be on the table. Indeed, as part of the fiscal cliff
negotiations in December, the Obama administration reportedly
offered to change the 90/10 match for Medicaid expansion. While the
administration eventually backed off that offer, it shows just how
tenuous federal funding promises really are.

Scott claims to have solved this problem through a provision
that sunsets the expansion in three years, meaning that the state
can back out if the feds fail to keep their end of the bargain. But
it is difficult to undo benefits once they are given. Scott himself
rendered the three-year sunset essentially meaningless, saying, “I
want to be clear that we will not simply deny new Medicaid
recipients health insurance three years from now.”

The governor’s turnaround will essentially create a Florida
where more than one in five residents will be on Medicaid, a
massive increase in dependency and government control over health
care. Studies show that patients on Medicaid consistently have far
worse outcomes than those with private insurance. Why then would we
want to entice thousands of Florida residents off private payment
and into a low-quality government program?

Fortunately, the final decision lies not with Gov. Scott but
with Florida legislators. The governor may have decided to chase
after the fool’s gold of federal funding, but legislators can still
defend Florida taxpayers by saying “No.”